The West Coast port strike will squeeze the trade deficit

AP Photo/Ben Margot Shipping companies and a powerful dock workers' union in West Coast ports reached a tentative deal last Friday after a nine-month slowdown.

In a note Tuesday, Goldman's Kris Dawsey wrote that although an agreement has been reached, shipments slowed in January, and likely February. The US international trade balance for January, out March 6, may send the trade deficit to its lowest level in a year.

"The case for a narrower trade deficit in January was already strong, in our view, given the suspicious jump in real petroleum imports in December and the continued drop in petroleum import prices through January," Dawsey wrote.

"Adding in the effect of port disruptions, our preliminary forecast for January is a large $8.6bn improvement inthe nominal trade deficit to -$38bn."

Dawsey continued: "However, any 'benefit' from the smaller trade deficit will probably begin to reverse by the end of March, by which point substantial progress should have been made in processing through the backlog of ships waiting to unload at West Coast ports."

The trade deficit unexpectedly widened by 17% to $46.6 billion in December, from $39.8 billion in November, and compared to a $38 billion forecast. That was the biggest deficit since November 2012.

Dawsey wrote that the slowdown could reduce first quarter GDP by two-tenths of a percentage point, although "the estimated effect is highly uncertain at this point in the quarter."

Meanwhile, Deutsche Bank forecast last week that the port slowdown could shave up to 1% off Q1 GDP.

Via Goldman, here's a chart that shows the fall in the value of imports that came through three of the largest US ports in January.